Question
What is Jensen's alpha measuring in a CAPM setting?
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Answer
Return above or below the CAPM-required return.
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Question
When is the Sharpe ratio more appropriate than the Treynor ratio?
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Answer
When evaluating the total risk of a portfolio.
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Question
How does the CML differ from the SML in the risk measure it uses?
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Answer
CML uses total risk auxtigma; SML uses beta.
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Question
If you want to detect whether a security is under- or overvalued, which line should you use?
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Answer
The Security Market Line.
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